2 March 2017. Moscow, Russia. – Detsky Mir Group ("Detsky Mir", "the Group" or "the Company") (MOEX: DSKY), Russia’s largest specialized children's goods retailer, announces its audited financial results in accordance with International Financial Reporting Standards (IFRS) for the full year ended 31 December 2016.

KEY FINANCIAL RESULTS FOR FY 2016

• Group revenue increased by 31.4% to RUB 79.5bn, vs. RUB 60.5bn in 2015
• In accordance with the methodology of calculation of like-for-like comparisons, which would be closer to methodologies used in operating and financial reporting of publicly traded retailers in Russia, like-for-like sales at Detsky Mir stores in Russia grew by 12.3%[1], with the number of tickets growing by 6.0% and the average ticket price increasing by 5.9%
• Gross profit increased by 23.8% year-on-year to RUB 27.1bn, with a gross margin of 34.1%
• Selling, administrative and other operating expenses[2]as a share of revenue decreased by almost 2.2p.p. to 25.9% compared to 23.7% for 2015, driven by increased operational efficiency
• Adjusted EBITDA[3]increased by 32.6% to RUB 8.2bn for FY2016 vs RUB 6.2bn for FY2015; the EBITDA margin reached 10.3%; EBITDA[4]amounted to RUB 8.2bn
• Adjusted profit for the period[5]increased by 74.8% year-on-year to RUB 3.8bn; Profit for the period amounted to RUB 3.8bn
• Adjusted net debt[6]/Adjusted EBITDA ratio improved to 1.4x vs 1.7x at the end of 2015

OTHER 2016 HIGHLIGHTS

• The Group’s total number of stores increased to 525, with total retail space of 596,000 sq.m. In 2016 the Group opened 100[7]new Detsky Mir stores and one ELC store
• The In-Store Pickup function launched in 2015 service became one of the key drivers of revenue growth for the online store that provided leadership for the Group in the sale of children's products in the e-commerce segment in 2016
• The Group increased dividend payments to shareholders by nearly 50% to RUB 4.4bn compared to FY2015 (RUB 3.0bn)
• The success of Detsky Mir’s IPO in February 2017 was the acknowledgement of outstanding performance by the Company over the last several years

Vladimir Chirakhov, PJSC Detsky Mir Chief Executive Officer, said:

“Our wide geographic reach, iconic brand, diversified product line and cutting-edge logistics and IT infrastructure supported the significant growth of Detsky Mir’s business and strengthened its leadership position in the children's goods market.

“2016, and the fourth quarter in particular, were successful for Detsky Mir. Revenues increased more than 31% for the year to RUB 79.5 billion. This significant increase was driven by strong like-for-like sales of the Detsky Mir chain in Russia, which stood at 12.3%, as well as thanks to stores opened in 2015-2016 operating at full capacity.

“Selling, general and administrative expenses as a proportion of revenue decreased by more than 2 p.p. This was achieved thanks to completion of a number of initiatives to automatize business processes, which boosted productivity in our stores.

“As an anchor tenant at the majority of shopping malls where we are present, Detsky Mir Group has succeeded in significantly lowering rental costs as a percentage of sales and increased the operational efficiency of our chain of stores.

“As a result, Detsky Mir Group generated record profit of RUB 3.8 billion and paid out dividends that represent a record for the company of RUB 4.4 billion – further confirmation of the investment appeal of the business.

“In 2016 the Group exceeded its own plans in terms of expansion of its geographic footprint, as it opened 100 Detsky Mir stores as well as one ELC store. The chain’s first stores were opened in the Russian South – in the Republic of Chechnya (Grozny), the Republic of Ingushetia (Magas and Nazran) and the Republic of Dagestan (Makhachkala) – as well as in cities in the Moscow Region, Eastern and Western Siberia and other regions.

“The Kazakh market continues to represent an attractive growth opportunity for the Detsky Mir chain. 2016 like-for-like sales in the country increased 35% in Kazakh tenge terms. During the reporting period five new stores were opened and the first supermarkets were opened in the Kazakh cities of Aktobe, Kostanay and Uralsk. As such, Detsky Mir’s retail chain in Kazakhstan now includes 12 stores in seven cities (Almaty, Astana, Aktobe, Karaganda, Kostanay, Shymkent and Uralsk).

“Growing the e-commerce segment is a key element of executing on the Company’s multi-channel strategy. Internet sales represented the Group’s fastest-growing sales channel. In 2016 online revenue more than doubled.

“In 2017 Detsky Mir Group will continue to grow the scale of its business. The Company plans to open at least 70 new stores.

“We are encouraged by the strong interest the market showed in our initial public offering (IPO) that took place in February 2017 on Moscow Exchange and are pleased to welcome the Group’s new shareholders. The Company’s IPO was the culmination of the outstanding performance over the last several years.”

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Conference call information

Detsky Mir’s management will host a conference call today at 4:00 pm (Moscow time) / 1:00 pm (London time) / 8:00 am (New York time) to present and discuss FY2016 results.

The dial-in numbers for the conference call are:

Russia

+7 495 705 94 72

United Kingdom

+44 203 043 24 39

United States

+1 866 907 59 24

PIN: 61918599#

The conference title: “«Detsky Mir Group - FY 2016 Audited IFRS Financial Results»”.

For additional information:

Disclaimer

Some of the information in these materials may contain projections or other forward-looking statements regarding future events or the future financial performance of Detsky Mir. You can identify forward looking statements by terms such as "expect", "believe", "anticipate", "estimate", "intend", "will", "could," "may" or "might" the negative of such terms or other similar expressions. Detsky Mir wishes to caution you that these statements are only predictions and that actual events or results may differ materially. Detsky Mir does not intend to update these statements to reflect events and circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. Many factors could cause the actual results to differ materially from those contained in projections or forward-looking statements of Detsky Mir, including, among others, general economic conditions, the competitive environment, risks associated with operating in the Russian Federation, rapid technological and market change in the industries Detsky Mir operates in, as well as many other risks specifically related to Detsky Mir and its operations.

([1]) Alternative like-for-like average growth, like-for-like number of tickets growth and like-for-like revenue growth based on the stores that have been in operations for at least 12 full calendar months.

In accordance with the conservative methodology of calculation of like-for-like comparisons, like-for-like sales at Detsky Mir stores in Russia grew by 10.8%, the number of tickets rose by 4.4% and the average ticket price increased by 6.2%. These drivers calculated on the basis of the operations of our Detsky Mir stores in Russia only. The Detsky Mir stores that are included in like-for-like comparisons are those stores that have been in operation for one full prior calendar year. For example, the like-for-like comparison of retail sales between 2015 and 2016 would include revenue of all Detsky Mir stores that were opened prior to 31 December 2014 and that were in operation during the entirety of 2015 and 2016.

([2]) Selling, general and administrative expenses exclude D&A expenses and are adjusted for share-based compensation and cash bonuses under the LTI program

([3]) Adjusted EBITDA is calculated as profit for the period before income tax, FX loss, gain on acquisition of controlling interest in associate, effect on disposal of subsidiary, net finance expense, D&A; adjusted for the one-off effect relating to disposal of the Yakimanka building in 2014; adjusted for share-based compensation and cash bonuses under the LTI program. See Attachment A.

([4]) See Attachment A for definitions and reconciliation of EBITDA to IFRS financial measures.

([5]) Adjusted for the one-off effect relating to disposal of the building occupied by the Yakimanka Gallery in 2014 (together with related tax effects), impairment of goodwill in 2015 as well as additional bonus accruals under the LTI program (together with related tax effects). See Attachment A.

([6]) Adjusted Net debt is calculated as total borrowings less cash and cash equivalent / adjusted for the loan issued to CJSC "DM-Finance" (a Sistema subsidiary) in 2013, fully repaid on February 27, 2017

([7]) Detsky Mir net chain growth since the beginning of 2016 amounted to 99 stores including one relocation.

([8]) Sistema is a publicly-traded diversified Russian holding company serving over 100 million customers in the sectors of telecommunications, high technology, pulp and paper, radio and space technology, banking, retail, mass media, tourism and healthcare services. Founded in 1993. Sistema’s global depositary receipts are listed under the symbol SSA on the London Stock Exchange. Sistema’s ordinary shares are listed under the ticker AFKS on Moscow Exchange.

([9]) RCIF is a private equity fund established in 2012 as two parallel funds by two government-backed investment vehicles—RDIF and China Investment Corporation. RCIF’s stake is held through its funds’ two wholly-owned subsidiaries, FLOETTE HOLDINGS LIMITED (wholly-owned by the fund of China Investment Corporation) and EXARZO HOLDINGS LIMITED (wholly-owned by the fund of RDIF).

([10]) Owned by the management of  Detsky Mir Group and Sistema under the long-term incentive program (LTI).